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Court Allows Debt Collector to Amend Answer and File Counterclaim for Debt – Glass & Goldberg | Financing, Property & Bankruptcy Law
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Court Allows Debt Collector to Amend Answer and File Counterclaim for Debt

gavel and law book on deskA recent ruling by the U.S. District Court for the Southern District of California allowed a debt collector to file an amended answer and assert a breach of contract counterclaim regarding a plaintiff’s $22,000 debt for a used vehicle purchase.

In Horton v. Calvary Portfolio Servs., LLC, the district court considered whether the debt collector could add a counterclaim under Rule 15(a)(2) of the Federal Rules of Civil Procedure, which allows a court to grant leave when “justice so requires.”

The four factors the court considers when deciding on allowing an amendment to a pleading include:

  • Prejudice to an opposing party
  • Undue delay
  • Bad faith
  • Futility

The plaintiff argued that the motion to amend should be denied on the basis of futility and bad faith; in addition, the plaintiff contended that the district court had no jurisdiction to rule in the matter. The court disagreed, calling into question the clarity of both parties’ pleadings as to futility. The court also noted that the plaintiff did not argue that the amendment would cause undue delay or prejudice, and so ruled that the amendment was not futile nor was it taken in bad faith. In addition, the court ruled that it had a compulsory requirement to exercise supplemental jurisdiction over the counterclaim, citing 28 U.S.C. § 1367, which governs counterclaims.

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